/ 13 November 2009

In or out?

The board of Eskom finally made a statement to the media on Thursday regarding the company’s leadership, saying categorically that Jacob Maroga has resigned.

But an Eskom source told the Mail & Guardian that Maroga still believes he retains his position as chief executive.

The stand-off comes despite assurances made by interim executive chairperson Mpho Makwana that the board has the full support of the shareholder, Minster of Public Enterprises Babara Hogan.

The statement was backed in Parliament by Hogan, who confirmed that Maroga had resigned. She criticised the racialisation of the matter, which saw Maroga portrayed as a target because of his skin colour, while former chairperson Bobby Godsell was vilified as a racist.

According to Makwana, extensive negotiations had taken place with Maroga to resolve the matter, including a five-hour meeting on Tuesday. This was, in part, the reason why a formal announcement to resolve the confusion had not been made sooner.

Hogan confirmed that negotiations had taken place and defended her decision to conduct the negotiations the way she had, despite pressure from the public to exercise more decisive leadership.

‘We tried to pursue options of facilitation, mediation and arbitration, even a negotiated settlement. During this period, a demand arose that the minister must provide ‘leadership’,” she explained.

‘As minister, I refused to override the principles of corporate governance by imposing a person in the position of chief executive without the authority of the law.”

Asked whether the board was concerned that a long legal battle might ensue should Maroga choose to contest its decision, Makwana said he could not predict what action Maroga might take.

‘He knows where the board and the shareholder stand on the matter. Whatever [Maroga] chooses is his prerogative,” said Makwana.

The Eskom crisis unfolded at a time when other parastatals have been hit with similar leadership crises. Political observers have called for boards at parastatals to be scrapped and for their functions to fall under government departments. But Hogan came out strongly in defence of boards.

‘Boards are appointed by government and, by law, are [obliged] to govern the company with the support of senior management. The shareholder oversees the functioning of the board, to ensure that the board and the company give effect to the strategic intent and objectives of government,” she said.

Maroga did not respond to a request from the M&G for an interview.

The chief executive’s electric chair
As Eskom burns in the fire fight being waged between its board and chief executive, it joins a host of other parastatals where leadership is faltering or has failed.

The SABC is without a chief executive, as are Transnet, South African Airways and, it would appear, Armscor.

Transnet is being watched over by Chris Wells and SAA’s acting chief executive is Chris Smyth. On Wednesday it was reported that Armscor chief executive Sipho Thomo is at odds with the board, which asked him to resign last week.

But though we can all live without the SABC, a national airline and certainly a national arms dealer, the country needs power. The hot seat at Eskom is probably the toughest position to fill. Just look at the chief executive’s in-tray.

Erstwhile Eskom chairperson Bobby Godsell drew up a list of 41 items that need sorting out at the utility. Pronto.

The items were contained in a document, presented to the board at its meeting in late October, which was leaked to the Mail & Guardian last week.

The bulleted points constitute a list of extracts from previous board meetings, going back more than a year, that are still unresolved or on which no progress has been made. They go to the heart of the trouble at this most important of utilities.

Perhaps most crucial to the running of Eskom is the finalisation of its long-term financial sustainability strategy and its business model — items three and eight in the document.

But for certainty on these two issues a range of other problems need to be dealt with first. These items appear and reappear in the document.

They include the resolution of long-term contracts, or ‘special contracts”, signed with large customers such as aluminium smelters.

In conjunction with this Eskom also needs to deal with the embedded-derivatives contracts, the disastrous hedges taken against these long-term contracts, which are placing severe strain on the company’s finances.

Other outstanding issues include electricity pricing for the poor and the strategy for providing free basic electricity to the indigent.

Then there is the issue of how to bring independent power suppliers into South Africa’s generation mix. But this cannot be done without more clarification on the debate about whether Eskom should be the single buyer of independently produced electricity.

As South Africa’s electricity reserve margin shrinks once again, thanks to a slow economic recovery, the question of energy savings is also back on the agenda. This will entail further discussion with larger customers.

The power conservation programme, undertaken in 2008 but left by the wayside as the recession cut into consumer electricity demand, is another way of addressing energy saving and it, too, is back on the to-do list.

Bad debts, coming chiefly from municipalities, are another serious concern, as is the company’s funding gap, which it needs to meet to continue its build programme.

One way to deal with this is to delay the building of Kusile, the second new power station, but it would appear, according to Godsell’s document, that a decision on this is pending.

These are just some of the serious tasks that need to be undertaken by whoever takes the helm at Eskom. The chief executive’s chair at the institution is nothing if not electric.


M&G Slow